Spanish banking giant Banco Santander has signed a deal to divest its retail and commercial banking franchise in Puerto Rico – Banco Santander Puerto Rico to First BanCorp, the bank holding company of FirstBank Puerto Rico for about $1.1 billion.

Considered to be the fourth largest banking franchise in the US territory, Banco Santander Puerto Rico holds a deposit market share of around 8%. It operates 27 branches and has 1,000 employees while holding $6.2 billion of assets under management.

Based in San Juan, FirstBank Puerto Rico is well-established on the Island. Post-acquisition, the combined banking business will give customers the second-largest branch network in Puerto Rico, with total assets under management of more than $17 billion.

Aurelio Alemán – President and CEO of First BanCorp said: “After completing comprehensive due diligence, we have signed an agreement to acquire Banco Santander Puerto Rico. This acquisition will significantly improve our scale and competitiveness in Puerto Rico while enhancing our funding and risk profile.

“The transaction is financially compelling and generates 35% accretion to fully phased-in 2020 consensus earnings per share (EPS) with a tangible book value per share earnback period of 2.6 years.”

Santander to divest its Puerto Rico banking business to FirstBank Puerto Rico. Photo courtesy of Junius/Wikipedia.org.

Santander said that the consideration is a 1.1x price to total book value. The transaction is likely to be completed in the middle of 2020 depending on receipt of regulatory approvals. Until then, Santander said that its service to customers in the region will be normal.

Santander plans to retain a presence in Peurto Rico through Santander Consumer USA, and a loan portfolio with $220 million net valuation.

Scott Powell – CEO of Santander Holdings USA said: “FirstBank Puerto Rico shares our values and our commitment to customers, and the local communities. Once completed, the transaction will provide the combined FirstBank Puerto Rico and Santander Bancorp Puerto Rico the ability to offer a broad array of retail and business banking products and services, with the scale to compete through an enhanced branch network to the benefit of both banks’ current and future customers.”

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